Africa/Global: Pandemic Mobilization amid High Vulnerability

Editor's Note

At a continental level as well as in almost all African countries,
African institutions mobilized quickly in response to the pandemic.
In most countries, the pandemic response so far has been
encouraging in terms of buying time by flattening the curve,
although implementation of lockdowns has been marred by human
rights abuses by security forces and insufficient funding for
support to those already economically vulnerable to loss of income.
A minority of countries, including Tanzania, Burundi, Cameroon, and
Madagascar, seem to be emulating the denial and delay pattern
previously followed by the United States and the United Kingdom.

With continued high vulnerability due to poverty and lack of
resources, a rapid expansion of the virus could still come at any
time. And, in economic terms, the continent faces the double
whammy of the impact of its own shutdowns and of the global
recession from which it is already experiencing massive
consequences.

Just below you will also find a wide selection of links to articles
that your editor has found useful. The amount of information coming
out is overwhelming, and this set of links is both highly selective
and incomplete. Most of the links are listed with no commentary
from the editor and no details about title or date if those details
are obvious from in the URL itself. But given limited time and
space, I decided to include more links for readers to choose rather
than additional descriptions or commentary.

Also strongly recommended for a longer read is The Continent, the new weekly newsletter from South Africa´s Mail and Guardian, which includes including critical articles on government strategies and reporting from journalists around the continent. The first two issues can be downloaded at https://mg.co.za/thecontinent/. It is available by email or WhatsApp.

Highly respected African public health officials, all with extensive international experience, are leading both the global and the African pandemic response. Pictured above are Dr. Tedros Adhanom Ghebreyesus, director general of the World Health Organization (WHO), from Ethiopia; Botswana-born Dr. Matshidiso Moeti, who directs the WHO regional office from Brazzaville; and Cameroon-born Dr. John Nkengasong, director of the Africa CDC in Addis Ababa.

Summary messages

People: Anywhere between 300,000 and 3.3 million African people
could lose their lives as a direct result of COVID-19, depending on
the intervention measures taken to stop the spread.

Africa is particularly susceptible because 56 per cent of the urban
population is concentrated in overcrowded and poorly serviced slum
dwellings (excluding North Africa) and only 34 per cent of the
households have access to basic hand washing facilities. In all, 71
per cent of Africa’s workforce is informally employed, and most of
those cannot work from home. Close to 40 per cent of children under
5 years of age in Africa are undernourished. Of all the continents
Africa has the highest prevalence of certain underlying conditions,
like tuberculosis and HIV/AIDS. With lower ratios of hospital beds
and health professionals to its population than other regions, high
dependency on imports for its medicinal and pharmaceutical
products, weak legal identity systems for direct benefit transfers,
and weak economies that are unable to sustain health and lockdown
costs, the continent is vulnerable.

Prosperity: The impact on African economies could
be the slowing of growth to 1.8 per cent in the best case scenario
or a contraction of 2.6 per cent in the worst case. This has the
potential to push 27 million people into extreme poverty.

Even if the spread of COVID-19 is suppressed in Africa its economic
damage will be unavoidable. The price of oil, which accounts for 40
per cent of Africa’s exports, has halved, and major African exports
such as textiles and fresh-cut flowers have crashed. Tourism –
which accounts for up to 38 per cent of the gross domestic product
(GDP) of some African countries – has effectively halted, as has
the airline industry that supports it. Collapsed businesses may
never recover. Without a rapid response, Governments risk losing
control and facing unrest.

To protect and build towards our shared prosperity at least $100
billion is needed to immediately resource a health and social
safety net response. Another $100 billion is critical for economic
emergency stimulus, including a debt standstill, the financing of a
special purpose vehicle for commercial debt obligations, and
provision of extra liquidity for the private sector.

Partnerships: African economies are
interconnected: our response must bring us together as one. The
development finance institutions must at this time play an
unprecedented counter-cyclical role to protect the private sector
and save jobs.

We must keep trade flowing, particularly in essential medical
supplies and staple foods, by fighting the urge to impose export
bans. Intellectual property on medical supplies, novel testing kits
and vaccines must be shared to help the continent’s private sector
take its part in our response.

The level of assistance that is required is unprecedented.
Innovative financing facilities are needed, including a complete
temporary debt standstill, enhanced access to emergency funding
facilities, and the provision of liquidity lines to the private
sector in Africa. We must “build back better”, by ensuring that
there is an abiding climate consciousness in the rebuilding and by
leveraging the digital economy. And we must be firm and clear on
good governance to safeguard African health systems, ensure proper
use of emergency funds, hold African businesses from collapse and
reduce worker lay-offs.

1. People

Susceptibility – sensitivity to spread and impact

Nearly 600 million people (43.5 per cent of Africa’s total
population) live in urban areas, of which 56 per cent (excluding
North Africa) live in slums. Slums are susceptible to the spread of
infectious diseases owing to population density, overcrowding, high
population mobility, quarantine enforcement difficulties and poor
access to health care. Surveillance, monitoring, containment and
mitigation interventions pose acute challenges for the control of
infectious disease outbreaks in slums.

The main transmission mechanism for COVID-19 is respiratory
droplets, against which regular hand washing is the best regular
control. Basic hand-washing access in Africa is limited, with 36
per cent of the population having no access to household
handwashing facilities, and a further 30 per cent having only
limited access.

The impact on levels of mortality and hospitalization of COVID-19
are highly related to age and underlying conditions, according to
data emerging from hard-hit regions. Cardiovascular disease,
respiratory disease, kidney disease, and immunocompromised
conditions, including HIV/AIDS and tuberculosis, prove particularly
dangerous. While Africa has a relatively favourable
demographic profile (nearly 60 per cent of the population below the
age of 25), the high prevalence of HIV/AIDS in southern regions and
levels of chronic respiratory and kidney diseases in certain
countries, tuberculosis and malnutrition are cause for concern.

Vulnerability – critical fragilities in Africa’s response

The health systems of countries in Africa are weaker than those
elsewhere in the world, with lower ratios of hospital beds, ICUs
and health professionals to its population. Africa has on average
1.8 hospital beds per 1,000 people, compared to 5.98 in France. Of
the 25 countries estimated by Rand to be most vulnerable to
infectious disease, 22 are in Africa.

Africa is critically dependent on imported medicinal and
pharmaceutical products. Every single African country is a net
importer of these. With 1.8 average hospital beds
per 1,000 people, hospital beds capacity across Africa is weak
products and as much as 94 per cent of Africa’s total stock of
pharmaceuticals are imported.At least 71 countries have
now imposed limitations or outright bans on exports of certain
COVID-19 essential supplies, putting access to these supplies in
Africa in a perilous position. Africa’s weaker economies will
struggle, however, to sustain health and absorb costs related to
lockdowns. Simultaneous economic shocks will exacerbate Africa’s
compromised capacity for action.

Lives – morbidity risks

How African countries respond to the COVID-19 crisis in the coming
weeks will affect the trajectory of national epidemics across the
continent. The Imperial College COVID-19 response team has combined
data on age-specific contact patterns and COVID-19 severity to
project the health impact of the pandemic in African countries. The
project compares predicted mortality impacts in the absence of
interventions or spontaneous physical distancing with what might be
achieved with policies aimed at mitigating or suppressing
transmission.

Scenario A is the worst case scenario characterized by no
interventions. Under this scenario the model predicts 1,222.3
million infections, 22.5 million hospitalizations and 3.3 million
deaths in Africa this year. Mitigation strategies targeted at
social distancing significantly reduce the burden on health systems
and number of deaths. Under the best case scenario (D), the model
predicts just 122.8 million infections, 2.3 million
hospitalizations and 0.3 million deaths.

If a suppression strategy is implemented early (at 0.2 deaths per
100,000 populations per week) and sustained, then 3 million lives
could be saved while if it is initiated when death numbers are
higher (1.6 deaths per 100,000 population per week) then 1.8
million lives could be saved: urgency is critical.

As with the Ebola crisis, COVID-19 will also impose spillover costs
on Africa’s existing health challenges as resources are redirected
and spread even thinner. During West Africa’s Ebola crisis, the
number of women giving birth in hospitals and health clinics
dropped by 30 percent and the maternal mortality rate increased 75
percent.COVID-19 is already limiting access to sexual
and reproductive health and increasing gender-based violence.

Focus on emergency health costs Fighting COVID-19 requires the
rapid mobilization of emergency health-care and social safety net
spending. We estimate the cost of emergency medical supplies and
personnel needed to respond to the COVID-19 crisis, based on the
four scenarios in table 1.1 (of the preceding subsection).

In a best-case scenario, with suppression and intense early
physical distancing interventions, $44 billion would be required
for testing, personal protective equipment, and to treat all those
requiring hospitalization and intensive care treatment across
Africa (scenario D). If COVID-19 were left to spread unmitigated,
the COVID-19 medical supply gap across Africa would reach
approximately $446 billion (scenario A), and Africa would be
completely unable to afford to treat even a fraction of all those
in need.

Healthcare demand in Africa can only be kept within manageable
levels through the rapid adoption of public health measures
(including testing and isolation of cases and wider social
distancing measures) to suppress transmission.

The largest share of projected medical supply costs is accounted
for by personal protective equipment (PPE) reflecting a significant
scale effect. This highlights the importance of getting basic
healthcare right. Ensuring sufficient supplies of PPE has even been
a challenge in more advanced economies such as the UK, USA and
Italy.

A crucial challenge for the continent is the very low ratio of
medical personnel per 10,000 patients as well as weak health
systems. The cost of the total health-care response (gap) is
therefore likely to be much higher than the figures depicted in
table 2.1 and figure 2.1, which are limited to medical equipment
and exclude costs for medical staff. Medical equipment such as
ventilators and oxygen concentrators are important, but without
trained personnel in sufficient numbers, they will be less useful.

Care must be taken over non-COVID-19-related health issues. The
experience of Ebola in west Africa suggested that funding and
resources are likely to be diverted away from other areas,
including sexual and reproductive health. This disproportionately
affects pregnant women, lactating mothers, girls, and women in
general as well as those facing existing health threats.

2. Prosperity

COVID-19 is a significant headwind for growth in Africa. The
uncertainty around the virus and the consequent policy actions,
such as physical distancing and lockdowns, have led to a decline

in demand for African products due to a sharp decline in global
manufacturing activities, compounded by a decline in economic
activity on the continent as the labour force remains at home to
combat the virus.

Against this backdrop, we estimate that, in a best- case scenario,
Africa’s average GDP growth will fall 1.4 percentage points, from
3.2 per cent to 1.8 per cent. In the worst-case scenario, Africa’s
economy could contract by up to 2.6 per cent in 2020.

Poverty impact – socioeconomic damage

We estimate that between 5 million and 29 million people will be
pushed below the extreme poverty line of $1.90 per day owing to the
impact of COVID-19, compared to the baseline 2020 African growth
scenario. Vulnerable households affected by COVID-19 face an
increased probability of moving into transient poverty by 17.1 per
cent, a 4.2 per cent increased probability of staying in poverty
for a decade or longer, and a fall in the probability of moving out
of poverty by 5.9 per cent. Increased poverty levels will also
exacerbate existing income inequalities.

For low-income households, which already spend an average of 36 per
cent of their income on health care-related expenses, access to
health care will become increasingly unaffordable in the wake of
COVID-19, leading to an increase in the number of households
falling below the poverty line.

Annual formal job creation (currently 3.7 million) is forecast to
drop by 1.4 to 5.8 per cent, compared with the baseline 2020
African growth scenario. An increase in informal and vulnerable
employment is expected (more than 60 per cent of men, and nearly 75
per cent of women are informally employed in Africa) and an
increase in out-of- pocket expenditure by poor and vulnerable
households.

The 2008 financial crisis increased vulnerable employment by 10 per
cent. The more systemic shock of COVID-19 is expected to increase
vulnerable employment considerably more than this, with the
International Labour Organization (ILO) anticipating 19 million job
losses in Africa as workers face full or partial workplace
closures.

Fiscal risk – Africa’s limited space to respond

Focus on falling tax revenues Africa remains the region with the
lowest tax-to- GDP ratio. At an estimated 13.4 per cent in 2018,
its tax-to-GDP ratio was lower than that of Asia (14 per cent),
Europe (25 per cent) and Latin America (18 per cent).

On the whole, average tax revenues on the continent consistently
decreased by 2.8 percentage points from 16.2 per cent of GDP in
2014 to 13.4 per cent of GDP in 2018. Commodity exporters have in
particular been under pressure since the 2014 commodity price
shock.

Notwithstanding increased government efforts on domestic resource
mobilization, several Africa countries (oil exporters and non-oil
exporters alike), in recent years have adopted policies such as tax
holidays that were aimed at attracting foreign direct investments.
Consequently, tax buoyancy in Africa has been less than 1, with
output and incomes growing much faster than tax revenues. Ethiopia,
Gabon, Ghana and Kenya are examples of countries that have export
processing zones or special economic zone agreements with foreign
countries that grant tax reductions.

Focus on largest taxpayers hit hard

Income tax is an important source of tax revenue for African
countries, contributing over 40 per cent of total tax revenue for
the lower-middle- income countries and middle-income countries.

Both personal income tax and corporate income tax are larger for
the more diversified economies like Kenya, Morocco and South
Africa.

In Egypt, Kenya, Morocco and South Africa, national carriers such
as Egypt Air, Kenya Airways, Air Maroc and South African Airways
are registered under the large taxpayers office. As at February
2020, regional carriers that cancelled flights to China included
RwandAir, Kenya Airways, Air Madagascar and Air Mauritius. The
subsequent losses were heavy, estimated at $29 billion globally and
$400 million for African carriers. More precisely, for instance, it
was estimated that Kenya Airways lost over $8 million monthly as a
result of suspending flights to China. Most airlines have currently
suspended flights to over 50 per cent of their destinations.

Countries that are tourist destinations such as Côte d’Ivoire,
Egypt, Kenya, Morocco and South Africa have also come under severe
pressure as travel restrictions are imposed. As an example,
following the imposition of travel restrictions from the northern
part of Italy by the Government of Kenya, the country is currently
experiencing holiday booking cancellations to Malindi, a popular
destination for Italian tourists on the country’s coast. It is
anticipated that this will lead to closure of hotels and
subsequently to job losses

As borders close as part of the COVID-19 policy response,
governments can expect a drastic reduction in revenue collection.
Local governments will also face a decline in own-source revenues
as well as national transfers, which account for 70–80 per cent of
their finances. Consequently, the financial capacity of African
national and local governments to respond to the COVID-19 crisis is
acutely impaired.

Focus on debt and borrowing

While developed countries have injected trillions of dollars into
COVID-19 health, social safety net and economic stimulus responses,
Africa severely lacks the fiscal space to react similarly. Africa
is fiscally hamstrung by four critical challenges: 1. High debt-to-
GDP levels; 2. High fiscal deficits; 3. High costs of borrowing; 4.
Depreciation of many African currencies against the euro and the
dollar.

Over 50 per cent of African countries recorded fiscal deficits
above 3 per cent in 2019. Similarly, some 22 African countries had
debt-to-GDP ratios above the African average of 61 per cent,
breaching the 60 per cent level of debt-to GDP-ratios, a threshold
that has been defined as uncomfortable even for the more advanced
economies with larger debt-carrying ca- pacities such as South
Africa. The increase in spending was a result of development
financing needs, in particular, investment in infrastructure.
Consequently, fiscal policy has come under pressure, with very
little or no fiscal space to deal with crisis situations under
normal circumstances.

Traditionally, countries may turn to the bond markets to seek funds
for stimulus programmes, but high borrowing costs hamper the
ability of countries to do so. Compared to developed economies and
emerging economies in Asia, the costs of borrowing in Africa are
extremely high, with many countries seeing yields in excess of 10
per cent on a 10-year sovereign bond. Raising additional funding
becomes very challenging and might further exacerbate debt burdens
for many highly leveraged countries.

Another challenge for bond issuance lies in the denomination of
many African sovereign bonds. Most African bonds are issued in
dollars or in euros, meaning that issuers have also to be wary of
exchange rate risk, especially if the home currency depreciates
against the issuance currency. Since January 2020, almost all major
African currencies have depreciated in value against the dollar and
the euro. As the crisis continues, investors and businesses will
continue to gravitate towards cash, potentially strengthening the
dollar and euro further, making debt servicing even more
challenging in the coming months.

It is clear that Africa does not have the fiscal flexibility or
space to deal with the shocks from the COVID-19 pandemic, even
though fiscal responses are critically needed to prevent economic
collapse.

Focus on financing Africa’s response

Taking cognizance of the fiscal situation in Africa, considerable
support will be needed for Africa’s health and social safety net
response and emergency economic stimulus. Based on the virtual
Ministers of Finance meeting hosted by ECA in March 2020, the
following suggestions are made for financing Africa’s response:

1. Secure a $100 billion African health and social safety net fund:

• For the most vulnerable, including feeding for out of school
children and unemployment support

• Prioritize its investment into climate conscious and
digitalization projects

• Ensure that stimulus supports African businesses through
allowing for the suspension of leasing, debt and other
repayments

• Support airlines and the future of tourism through temporary
tax waivers and encouraging banks to renegotiate loans

• Grant tax breaks to forestall the collapse of firms that keep
jobs, maintain activity and that can earn export revenues in
the recovery

3. Complete temporary debt standstill for two years for all African
countries, low and middle income included. Many countries,
especially in Africa, have lost market access because of the
COVID-19 pandemic, and must also confront the consequences of the
pandemic which include substantial losses in major revenue sources.
These pressures have made debt service unsustainable for most.

4. Double access to the IMF Emergency Financing Facility and raise
IMF special drawing rights allocations to provide additional
liquidity, particularly for the procurement of basic commodities,
food, fuel and other essential commodities, and also to provide
liquidity to the financial sector, private sector, corporates and
in particular small and medium-sized enterprises over the next
two–three years. This could in part also serve as a bridge special
purpose vehicle for commercial debt servicing.

5. Accelerate disbursement of budget support through fast
disbursement facilities, including the Crisis Response Window, the
Global Pandemic Window and reprogramming of regular programmes at
the World Bank Group and similar measures from the European Union
and other Group of 20 members.

Countries in return pledge to build and strengthen systems to fight
corruption and to enhance predictability, transparency and
accountability of flows so that finance ministers can plan
effectively and civil society stakeholders can help to track fund
flows to ensure that these reach those most in need expeditiously.

Focus on governance

African Governments must ensure the proper use of any COVID-19
financial assistance, debt forgiveness or borrowing. The young
people of Africa will not forgive the misappropriation of COVID-19
emergency funds. Citizens and all stakeholders, including
development partners working with Africa to strengthen COVID-19
responses, will be better assured if financial flows and debt
forgiveness or forbearance measures go through strong institutional
processes. This must be balanced against speed, to ensure a rapid
response to urgent needs.

Finally, with 2020 having been designated by the African Union as
the year when it would achieve its initiative of Silencing the
Guns, governments must take care to protect against the ravages of
unemployment and the disenfranchisement of their young people
brought on by the economic impact of COVID-19. Mass unemployment is
a fertile breeding ground for civil unrest.

Indirect shock – ripple effects

As the severity of COVID-19 emerged in February and March 2020,
commodity prices plummented for more than 67 per cent of African
exports. The price of petroleum oils, which account for 40 per cent
of African exports and about 7.4 per cent of total GDP in Africa,
crashed more than 50 per cent to their lowest levels since 2003.
Metal prices are down 20 per cent on December-end values, the FAO
food price index lost 5 per cent in that period, while cotton – as
proxy for textiles – fell 26 per cent. The exception is gold, an
investment safe haven, which is up by 5 per cent.

The crashing of oil prices has considerable fiscal and exchange
rate implications for Africa’s many fuel-oriented economies. We
estimate a $65 billion loss to fuel revenues, at a minimium, for
2020. Large gold exporters, such as Ghana, South Africa and Guinea,
which account for 20 per cent, 17 per cent and 9 per cent of
Africa’s gold exports, respectively, will experience a small
compensatory benefit from the rise in the price of gold.

Also problematic has been the shift in the COVID-19 epicentre from
China, which accounts for 11 per cent of African exports and 16 per
cent of imports, to Europe, which accounts for 33 per cent of
African exports and 32 per cent of imports, further disrupting the
continent’s global trade value chains.

[detailed sections follow on trade in textiles, coffee and cocoa,
tourism, and flowers, as well as on remittances, the specific
situation of women.]

3. Partnerships

[not included in these excerts]

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